- The Washington Times - Tuesday, November 7, 2006

The liberal activist group Families USA issued a flawed study last week on the Medicare prescription drug benefit that simply does not reflect reality. The report says the drug benefit as currently designed endangers millions of seniors by imposing financial penalties and creating considerable anxiety.

By ignoring the overwhelming approval millions of beneficiaries give the Medicare prescription drug benefit, the radical left has shown again its sole strategy is to score political points — particularly before the election — by scaring seniors.

Consider the skewed study by Families USA. Though 90 percent of Medicare beneficiaries now have broad and affordable prescription drug coverage, when four years ago only a quarter did so, the report focuses on the narrow issue known as the “doughnut hole.” This is the period in coverage where beneficiaries, having used $2,250 worth of medications, might not have their medications covered until they use $5,100 worth. During this time, they might pay for their drugs out of their own pocket.

Labeling the coverage gap as “bizarre” and “troublesome” is misleading, as their analysis is based on several fundamental flaws. It defines “meaningful coverage” as only 25 medications, which amount to 0.6 percent of about 4,000 drugs the typical Medicare drug plan covers. They also fail to note there are other generic drugs available to treat the same conditions as those in the 25 drugs they list.

In fact, many of the high-priced blockbuster drugs listed have therapeutic alternatives not mentioned in the study. Also, four of the drugs are listed twice because they are prescribed in different doses. Such double-counting is a major analytic flaw that unfairly skews the results for the worse.

Beyond these flaws, the “doughnut hole” in general will not be an issue for 71 percent of Medicare beneficiaries. They either will not spend enough to hit the gap or will be covered under a low-income subsidy program, existing coverage, or Part D plan with partial or full gap coverage. Of the remaining 29 percent potentially subject to the gap, every beneficiary in every state can choose an affordable drug plan that offers gap coverage for both generic and brand-name drugs.

Most will find coverage. Only 8 percent of beneficiaries will actually hit the “doughnut hole” with no coverage, according to PricewaterhouseCoopers. For them, they will still be far better off than prior to the new benefit. The first $2,250 they will have spent on prescription drugs has been covered. And beyond that direct savings, competition among private insurers has dramatically reduced the prices of Medicare drug plans. Competition has saved the average beneficiary nearly $1,500 a year off of their drug costs, according to the Centers for Medicare and Medicaid Services.

The small minority that reaches the “doughnut hole” without gap coverage still has workable options. In 27 states, Wal-Mart now offers nearly 300 generic drugs for as low as $4 for a one-month supply, regardless of insurance status. Other major retailers have announced similar programs. Meijer pharmacies now offer leading generic antibiotics absolutely free. Other options include prescription drug assistance programs through national and community-based charities, pharmaceutical manufacturers, and many states. Medicare has a section on its Web site called “Bridging the Coverage Gap” that details many options.

By trotting out flawed studies on the “doughnut hole” days before the election and focusing campaign rhetoric on drug reimportation and federal negotiation with drug manufacturers, the left shows once again it would rather scare seniors and vilify pharmaceutical companies than discuss real structural improvements in Medicare — ones that would undoubtedly cover the “doughnut hole.”

For instance, creating a Travelocity model of drug purchasing, like that used in air travel pricing or on eBay, would empower seniors and dramatically reduce costs. Choice and open access to real-time information creates competition, and competition drives down price. Reduced drug prices in a Travelocity model, which some estimate to be between 20 percent and 40 percent, would more than cover the “doughnut hole.”

Reimbursing physicians, hospitals and others based on the value or quality of care they deliver, rather than how many transactions they process, would dramatically improve the health of all seniors in Medicare. Healthier beneficiaries are cheaper beneficiaries. Incentivizing the adoption of health information technology, which undoubtedly improves care, would also reap dramatic savings.

Let’s agree there are serious problems to solve in Medicare. But rather than exchanging ideas, the left would rather play “Medi-scare.” This might have provided a good sound byte before Election Day, but it does nothing to transform the program to work for all beneficiaries — and the taxpayers who fund it.

Newt Gingrich, former speaker of the House of Representatives, is founder of the Center for Health Transformation. David Merritt is a project director at the Center. PricewaterhouseCoopers is a member of the Center.

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